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Exploration minnows – long a feature of the Irish and UK markets – could flourish as oil majors slash exploration budgets and focus on existing assets, the chief executive of Tullow Oil, Aidan Heavey has predicted.

With the price of oil having slumped, major oil companies are hacking away at costs in order to preserve their balance sheets, and one of the first casualties has been exploration spending budgets.

The price of Brent crude was hovering around $31 a barrel yesterday, half the price it was at this time last year.

“The natural supply and demand will not be met at these oil prices, or even double the current prices, so you’re going to end up with a shortfall in supply if you don’t start major investment,” Mr Heavey, inset, told the Irish Independent.

Mr Heavey said he hopes some oil price stability will manifest itself later this year.

“There’s no doubt there’s an oversupply of oil in the world, but most of it is in the ground, it’s not flowing,” he added.

“The oil industry operates in cycles. You have a period of time when there’s a major disruption in the industry and that causes consolidation,” he said.

“People concentrate on production and development, not exploration. It’s the small minnows who start the exploration again. The gap in the market ends up being filled by small companies.”

Mr Heavey was speaking as Tullow Oil reported a pre-tax loss of $1.3bn for 2015, which was narrower than the $2.04bn loss it reported in 2014. Its revenue fell 27pc to $1.6bn. Shares in the company fell 8pc in London. They’re at about a tenth of the level they were back in 2012.

Tullow is largely focused on Africa, where it has a 35pc stake in the huge Jubilee offshore oil field off Ghana. Tullow also has a 47pc stake in the massive TEN field close to Jubilee.

By next year, Tullow will be generating about 100,000 barrels of oil a day in west Africa, compared to 66,600 last year.

Oil is due to start flowing from TEN in July or August this year, and even at current oil prices, Tullow will become cash flow positive from the end of this year, Mr Heavey said. He added that if oil prices remain at their current levels, then the company will use cash to help reduce its $4bn net debt.

Once the TEN field starts operating, Tullow’s capital expenditure commitments fall sharply. Its 2016 capital expenditure is expected to drop to about $900m, with $600m of that earmarked for TEN. It said it has the potential to reduce group capital expenditure from 2017 onwards to about $300m.

Tullow moved quickly last year to slash its costs, and reduced its headcount by 37pc. It expects to generate $500m in savings over five years.

Mr Heavey conceded that it is frustrating that Tullow continues to be battered by markets.

“If you do the right things, do them quickly and lead the way in doing them, you’ll be the first to recover,” he said. “But no matter what you do in the current climate, there is a negative position in relation to oil. If the oil price goes down, we go down; if it goes up, we go up. All you can do is make sure the company is in good shape.”

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